Stocks mostly slipped in quiet, pre-holiday trading on Monday.
In the end, the Dow Jones Industrial Average lost 0.2%, the S&P 500 Index wafted down 0.1%, the Nasdaq Composite shed 0.1% and the Russell 2000 was the only gainer, finishing the day off 0.4% higher. Treasury bonds were little changed, the dollar gained 0.3%, commodities were under pressure with copper and nickel down 2.2% and 5.2%, respectively, while gold lost 0.9% and crude oil finished with a 0.1% loss.
Consumer staples led the way with a 0.8% gain followed by energy, up 0.7%. Utilities and telecoms were the laggards down 1% and 0.7%, respectively.
There was some excitement in crude oil overnight after West Texas Intermediate spiked on a statement from Saudi Arabia’s cabinet that Riyadh was “willing to cooperate with OPEC and non-OPEC producers” to maintain a “stable” energy market. After an initial surprise, pessimism crept back in. Especially after earlier comments from Venezuela’s oil minister that crude could fall into the mid-$20s next year if OPEC doesn’t cut production.
In M&A news, Pfizer Inc. (NYSE:PFE) and Allergan PLC (NYSE:AGN) agreed to merge in a tax inversion deal totaling $155 billion to create the world’s single biggest drugmaker by sales. The new firm will maintain AGN’s corporate structure domiciled in Ireland but keep the Pfizer name. PFE expects the combined company to have a tax rate of around 17% or 18%, well below its current 25% tax rate.
On the economic front, the Markit Manufacturing PMI Index slipped to 52.6 from 54.1 last month in what was the weakest result in more than two years. While domestic demand is holding up rather well, the drags from a sluggish global economy and a strong U.S. dollar are pressuring factory new orders growth. October existing home sales declined slightly to 5.36 million units on a seasonally adjusted annualized rate vs. 5.55 million units in September.
In Federal Reserve news, chairman Janet Yellen deflected criticism from Ralph Nader, accusing her of hurting seniors and savers by keeping interest rates low, to which Yellen countered that the Fed “not act[ing] as forcefully as it did” would have hurt the economy and stalled growth.
Tyson Foods, Inc. (NYSE:TSN) gained 10.2% after reporting a fiscal Q4 earnings miss but better-than-expected revenues. Trina Solar Limited (ADR) (NYSE:TSL) lost 6.1% after a Q3 earnings miss on weaker margins.
Steelmaker ArcelorMittal SA (ADR) (NYSE:MT) lost 4.8% after being downgraded by analysts at Barclays. And GameStop Corp. (NYSE:GME) lost 4.2% after a Q3 earnings miss on weaken revenue and comp-store sales below consensus and guidance.
Technically, stocks remain vulnerable amid narrowing breadth (weakening buying demand) and a multiplicity of negative divergences including large-caps vs. small-caps and stocks vs. commodities and high-yield bonds.
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